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THE ESSENTIAL INSURANCE CHECKLIST FOR SEMICONDUCTOR MANUFACTURERS
Why Semiconductor Insurance Needs a Different Approach
Semiconductor manufacturing is not “standard manufacturing”. The values are high, the processes are sensitive, and the losses tend to cascade. A small incident can trigger a big outcome: contamination can reduce yield, a utilities failure can stop multiple lines, a test escape can become a multi-jurisdiction liability dispute, and a cyber event can shut down production systems and corrupt data at the worst possible time.
That’s why semiconductor businesses often need a coordinated insurance programme rather than a handful of disconnected policies. The key is to protect: (1) your assets (buildings, cleanrooms, tools, utilities plant, stock and work in progress), (2) your cashflow (business interruption, extra expense and expediting costs), and (3) your liabilities (public and employers’ liability, product/device liability, and in some cases recall/withdrawal expenses).
This guide explains the main covers most semiconductor manufacturers consider, how they work together, and the common gaps that cause problems at claim time. Insure24 can help you build a programme that suits your exact operation — fab, OSAT, packaging/test, module assembly or electronics manufacturing — and aligns with customer contract requirements and export territories.
1) Property, Buildings, Cleanrooms, Plant, Stock & WIP
Property insurance is usually the foundation of a semiconductor insurance programme. It protects buildings and contents against insured perils such as fire, explosion, flood, storm, escape of water, malicious damage and (depending on wording) other causes of physical loss or damage. For semiconductor manufacturers, the “property” is often more than the building — it includes cleanroom fit-out, high-value tools, utilities infrastructure, specialised installations, and the stock/WIP that can be worth far more than it looks on a normal balance sheet.
The most common property mistakes we see are: under-declaring cleanroom reinstatement values, treating critical utilities plant as “miscellaneous”, failing to capture peak stock/WIP, and not addressing customer-owned goods (bailment/custody). The right programme should reflect your maximum foreseeable loss (MFL) and realistic reinstatement timelines.
What It Typically Covers
- Buildings and permanent fixtures
- Cleanroom fit-out and specialist infrastructure (where declared)
- Contents, plant & machinery, tooling and equipment
- Stock and work in progress (WIP), subject to valuation and limits
- Customer-owned goods in your custody (where agreed)
- Debris removal and professional fees (where included)
- Optional: flood extensions and wider perils depending on location
- Optional: “all risks” structures for certain items (wording dependent)
Key Semiconductor-Specific Considerations
- Peak WIP values: what’s on site at the busiest point in the cycle?
- Valuation basis: replacement cost vs manufacturing cost vs selling price
- Contamination risk and cleanroom reinstatement complexities
- Long lead-time equipment and tool replacement planning
- Utilities dependencies: chillers, vacuum, compressed air, UPS
- Customer custody terms (bailment) and contractual insurance duties
- Multiple sites and interdependencies (hub-and-spoke operations)
- How deductibles apply to stock/WIP vs buildings vs tools
2) Business Interruption (BI) & Extra Expense
Business interruption cover is where semiconductor losses can become very large. BI protects your gross profit (or contribution) when an insured event causes disruption. It can also include increased cost of working / extra expense — the additional costs you incur to reduce the overall loss, such as overtime, subcontracting, temporary equipment hire and emergency logistics.
The key BI questions are: what is your true “bottleneck”? How long would it take to restore stable production following major damage? And what is the realistic indemnity period (12, 18, 24 months or more)? Semiconductor recovery can be slow because reinstatement isn’t just “repairing a building”; it often includes re-qualification, revalidation, supplier re-onboarding, and stabilising yield.
BI Covers You’ll Often See
- Loss of gross profit following insured damage
- Increased cost of working / extra expense to reduce loss
- Claims preparation costs (where included)
- Alternative premises / temporary relocation costs (where viable)
- Optional: suppliers / customers extension (contingent BI)
- Optional: utilities interruption extensions (wording dependent)
- Optional: denial of access and non-damage extensions (limited availability)
- Optional: expediting expenses tied to breakdown or damage
Common BI Gaps in Semiconductor Risks
- Indemnity period too short for tool lead times and re-qualification
- BI trigger doesn’t match breakdown or cyber scenarios
- Understated “increased cost of working” limits
- Lack of clarity on WIP impact and recovery timeline
- Supplier dependency not addressed (single-source materials)
- Waiting periods that don’t reflect realistic downtime events
- Deductibles that apply multiple times across covers
- Definitions that create disputes at the boundary of “damage”
3) Machinery & Equipment Breakdown (Engineering)
Machinery breakdown cover is vital for semiconductor sites because many of the most disruptive incidents are not “fire or flood” losses — they are internal failures: electrical burnout, control system faults, compressor failures, vacuum pump seizure, chiller breakdown, or power-quality events that damage sensitive equipment.
Breakdown cover can be structured as repair/replacement only, or extended to include loss of profits and extra expense following insured breakdown. It can also include expediting and temporary plant hire options. The right schedule and underwriting presentation matters: insurers want to see a robust maintenance strategy, condition monitoring, redundancy and critical spares planning.
Why It’s Commonly Needed
- Protects against sudden internal failure of plant and equipment
- Covers critical utilities plant that supports controlled environments
- Can include expediting costs to reduce downtime
- Optional: breakdown BI / extra expense extensions (where arranged)
- Supports faster restoration and cashflow stability after incidents
- Complements property insurance (different trigger focus)
- Helps address long lead-time repair and parts constraints
- Improves claims outcomes when structured with BI and stock/WIP
Typical Assets Considered
- Chillers, cooling loops, compressors, dryers and HVAC plant
- UPS systems and certain electrical infrastructure (subject to underwriting)
- Vacuum systems, pumps and associated plant
- Automation, robotics and handling systems
- Packaging/test equipment (ATE, handlers, ovens)
- Control systems (PLC, drives, control cabinets) where insurable
- Specialist production tools where appropriate and scheduled
- Critical monitoring and process support equipment
4) Liability: Public, Employers’ & Product / Device Liability
Liability exposures in semiconductor manufacturing often come from three directions: (1) people and premises risk (public and employers’ liability), (2) product/device failures (product liability), and (3) complex contractual environments. Even if contracts limit liability, legal defence costs can be significant, and disputes can span multiple territories.
Employers’ liability is legally required for most UK businesses with employees. Public liability covers third-party injury or property damage arising from your operations. Product/device liability covers claims arising from defective products causing injury or property damage, often including worldwide exports and (where required) USA/Canada territory.
Many commercial “chargebacks” and contractual penalties are not automatically insured. A good programme is built to protect the losses insurance can respond to (damage, injury, defence costs, certain recall expenses) and to reduce uninsured gaps through contract review and governance.
Liability Covers Most Manufacturers Need
- Employers’ liability (UK legal requirement for most employers)
- Public liability (visitors, contractors, third-party property damage)
- Product / device liability (downstream device failure claims)
- Worldwide cover options (including USA/Canada where needed)
- Legal defence costs included within the liability cover
- Optional: vendors/additional insured endorsements (where offered)
- Optional: product recall / withdrawal expense (separate cover)
- Support with certificates for procurement onboarding
What Insurers Commonly Underwrite Closely
- End use (automotive, medical, aerospace, industrial, consumer)
- Territories and export footprint (direct and indirect)
- Quality systems, traceability, lot control and change management
- Testing, qualification, burn-in and failure analysis capability
- Largest customers and contractual insurance requirements
- Claims history: RMAs, field failures, recalls and major disputes
- Subcontractor reliance (fab/OSAT partners) and supplier controls
- Wording risks: exclusions that undermine assumed protection
5) Cyber, Data, OT & Network Interruption
Semiconductor manufacturing is increasingly dependent on connected systems: test data, MES, process controls, remote monitoring, supplier connectivity and customer portals. This increases exposure to ransomware, data breaches, business email compromise, and operational technology (OT) disruption.
Cyber insurance can cover incident response costs, forensic investigation, legal and regulatory costs, notification expenses, and (depending on wording) business interruption and data restoration. For manufacturers, it’s important to consider whether your key risk is data confidentiality, operational downtime, or both. Many businesses now need a cyber programme that recognises OT realities.
Cyber Covers Often Considered
- Incident response and forensic investigation
- Data restoration and system recovery costs
- Business interruption (cyber-triggered) where included
- Ransomware response support (policy dependent)
- Third-party liability for data breaches (where applicable)
- Regulatory and legal costs relating to breaches
- Optional: network interruption extensions for key services
- Optional: OT-focused enhancements (market dependent)
Why It Matters for Semiconductor Sites
- Downtime can be catastrophic — schedules and yield are time-sensitive
- Test data integrity and traceability are critical to customer confidence
- Supplier and customer connectivity increases attack surface
- Legacy OT systems can be difficult to patch without disruption
- IP and design data can be high value (and high consequence)
- Third-party service dependency risk (cloud, managed services)
- Procurement frameworks increasingly require cyber governance
- Claims outcomes depend heavily on evidence and incident response readiness
Insure24 helped us turn a “pile of policies” into a coherent programme. The biggest improvement wasn’t just price — it was removing gaps between breakdown, BI and liability.
Finance Director, Semiconductor Manufacturing BusinessCORE COVERS MOST SEMICONDUCTOR MANUFACTURERS NEED
- Property damage for buildings, cleanrooms, plant and contents
- Stock & WIP cover (including customer-owned goods where agreed)
- Business interruption and extra expense (cashflow protection)
- Machinery breakdown for critical utilities and equipment
- Employers’, public and product/device liability
- Cyber/OT cover where operational and data systems are exposed
OPTIONAL EXTENSIONS THAT OFTEN MATTER
- Contingent BI and supplier/customer dependency
- Transit/cargo for high-value shipments
- Expediting costs and temporary equipment hire
- Recall/withdrawal expense cover (where appropriate)
- Contract review support to reduce uninsured obligations
- Alignment of deductibles/waiting periods to real downtime scenarios
Compliance, Governance & Insurance Readiness
Semiconductor insurance terms and claims outcomes are heavily influenced by governance: maintenance records, change control logs, traceability, calibration, incident response processes, contractor controls and documented corrective actions. Insurers look for evidence that issues are detected quickly, contained, and prevented from recurring.
Insure24 helps you present your controls clearly and build “claims readiness” into the programme — so that if an incident happens, documentation is already structured and the claims process moves faster.
- Maintenance strategy (PPM), OEM contracts and condition monitoring
- Quality systems: traceability, lot control and quarantine procedures
- Change control for recipes/parameters, software and tooling
- Environmental monitoring, alarms and response logs
- Contractor control: permits, supervision and safe systems of work
- Incident response: escalation, evidence preservation and communication
- Cyber governance for connected systems and supplier access
- Documented CAPA and continuous improvement evidence
FREQUENTLY ASKED QUESTIONS
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What are the core insurance policies a semiconductor manufacturer needs?
Most semiconductor manufacturers consider: property insurance (buildings, tools, stock/WIP), business interruption and extra expense, machinery & equipment breakdown, employers’ liability (required for most UK employers), public liability, and product/device liability (often worldwide). Many also consider cyber/OT cover and transit for high-value shipments.
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Do I need machinery breakdown cover if I already have property insurance?
Often yes. Property insurance focuses on external perils (fire, flood, storm, escape of water). Machinery breakdown insurance is designed for internal failures of equipment (mechanical/electrical breakdown, control faults). Semiconductor sites frequently suffer their most disruptive downtime from breakdown and utilities plant incidents rather than classic property perils.
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Can I insure customer-owned wafers, devices or WIP in my custody?
Often yes, but it must be structured carefully. Insurers will want clarity on custody and contract terms (bailment), maximum values on site, valuation basis and your responsibilities. Insure24 can help align the policy to your obligations and avoid gaps.
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Do I need worldwide product liability (including USA/Canada)?
If you sell into the USA/Canada directly, or your customers require it for procurement, you may need worldwide cover including USA/Canada. Even indirect exposure can matter if your components end up in those markets. Insure24 will help map territories, end-use risk and contractual requirements to structure appropriate cover.
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Is yield loss or production defects insurance available?
Some yield-related losses can be insured when they arise from an insured trigger (for example physical stock/WIP damage, insured contamination following damage, or insured machinery breakdown leading to disruption). Pure process drift, normal rejects and purely contractual losses are often excluded. Insure24 helps structure cover around realistic insurable scenarios and clarify what must be managed operationally.
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What do insurers need to quote semiconductor manufacturing insurance?
Typically: site/process overview (fab/OSAT/assembly), values (buildings, cleanroom fit-out, plant, utilities), stock/WIP maxima, turnover and territories, key customers and contract requirements, quality/traceability controls, maintenance and redundancy strategy, cyber/OT controls where relevant, and claims history.